The foreclosure process in Texas is swift and simple. By law, homeowners in default on their mortgage could lose their home in as little as 41 days. And because Texas is a non-right of redemption state, once that foreclosure has taken place, there is no opportunity to reclaim your property. That is why it is extremely important for you to be informed and act quickly when you encounter difficulty making your mortgage payment.
Fortunately there are many options available to assist Texas Homeowners facing mortgage or financial difficulty. In this blog, we’ll go over some of the processes and pitfalls of a foreclosure.
STEP ONE: Notice of Default/ Demand Letter
If you, the borrower defaults on your mortgage loan your lender may initiate the foreclosure process. The lender or loan servicer is required by law to send a written notice to your allowing you 20 days to “cure” or pay in full the amount owed to bring the defaulted loan current; otherwise, the foreclosure will be initiated. The Default or Demand Letter outlines the amount due and the date it must be paid.
STEP TWO: The Sale
After the allowable 20-day cure period, at least 21 days must pass before a foreclosure sale can occur. The Lender is required to post the notice of foreclosure at the courthouse and file the notice with the county clerk at least 21 days before the sale, and notify the borrower of the date and time of the foreclosure sale. By law, foreclosure sales (an auction) in Texas occur on the first Tuesday of each month following legal notice, and anyone may bid on the property.
On the date of the sale, the trustee named in the deed of trust or its representative conducts the foreclosure sale on the courthouse steps. This reading must be conducted within three hours of the time designated in the notice of sale. The sale is to the highest bidder for cash. The trustee or lender representative places a bid for the lender at either the amount of the debt or a lesser amount. A bid higher than the lender’s bid will normally be enough to allow the bidder to buy the property. The title is transferred by means of a trustee’s deed to the lender or the highest bidder.
STEP THREE: Leaving the Property
Once the foreclosure sale has concluded, the lender or the new property owner may provide you with a notice to vacate the property i if you are still occupying the property. If you do not vacate the property the lender or the new property owner will file a lawsuit to evict you and the lawsuit notice will be served by county constable’s offices or private process server. Soon thereafter, you will receive notice from the court of a court date. After the court hearing you will have a short amount of time to vacate the property or appeal the judge’s ruling.
Except in a few very limited situations, once a home has been foreclosed upon, there is NOT a redemption period in the state of Texas. Therefore it is very important for Texas homeowners to be aware of their options and to take steps to protect their homeownership. It means losing your largest asset.
Here’s another pitfall when it comes to foreclosures:
Any time a debt is forgiven, it’s taxable. Since you didn’t pay back money you had borrowed, the IRS considers it income. Therefore, sometime later you receive a bill for taxes on the amount of mortgage that the lender was never able to get back from the sale of the property.
However, there are exceptions if your debts exceed for assets by $15,000. The IRS allows taxpayers to escape lien on forgiven debts if they are insolvent. Consult your tax preparer for more information as tax laws change from year to year.
FORECLOSURE FALLOUT
Another aspect of foreclosure is the impact it has on your family, not just financially, but emotionally. The stress of not meeting your obligations, being forced to leave your home with the memories you made there, not to mention the change in routine for your children, perhaps having to leave their school or neighborhood – all of that is tremendously difficult.
If there is any comfort to take from the situation, remember that in recent years the jump in the number of foreclosures lessens the stigma of the event in the eyes of many. But if you become active in the foreclosure process early on, you may save yourself some heartache. Do this yourself or with the help of a qualified attorney and it is possible to take steps to avoid the foreclosure sale.
Of course, the best way to avoid the threat of foreclosure is to be attentive to those mortgage payments and make them on time.
– The Business Team
Scott | Josh | Jeremy